(Reuters, London, 16 December 2020) Many of the world’s biggest lenders to shipping companies fell short of carbon-cutting targets last year in the first analysis of CO2 goals for the sector. Global shipping accounts for nearly 3% of the world’s CO2 emissions and the industry is under pressure to reduce those emissions and other pollution. About 90% of world trade is transported by sea. Last year, a group of leading banks signed up to environmental commitments known as the Poseidon Principles, whereby financiers take account of efforts to cut CO2 emissions when providing loans to shipping companies. In the first climate assessment report issued by the signatories, which includes emissions data collected from borrowers, just 3 of 15 financiers – Bpifrance Assurance Export, Export Credit Norway and ING – were aligned with IMO decarbonisation targets in 2019. Twenty banks jointly representing approximately USD 150 billion in shipping finance, have come together to commit to the Poseidon Principles, some of them ECAs.
ECAWatch Newsletter 19
Swedish ECAs propose $2-billion credit for aviation development in Vietnam
(VnExpress International, Hanoi, 6 December 2020) Swedish financial institutions have proposed a commercial loan to develop aviation projects in Vietnam, including the Long Thanh International Airport. The Swedish Export Credit Agency and the state-owned Export Credit Corporation in Sweden have now proposed increasing the credit limit to $2 billion to cover upgrade projects and air traffic management expansion. To be eligible for the credit line, Vietnam will have to use 30% of the loan to purchase Swedish technologies and equipment. In addition to the Long Thanh and Tan Son Nhat airports, Vietnam plans to upgrade other airports. The country currently has 22 civilian airports. They served near 116 million passengers last year, up 12 percent from 2018.
UK widens access to export loans as post-Brexit transition ends
(Reuters, London, 7 December 2020) Britain’s government said on Monday it would offer a wider range of loan guarantees to promote exports as part of a drive to boost overseas sales following the country’s departure from the European Union, its biggest foreign market. Lenders will receive a state guarantee for 80% of the money they lend to companies to support exports, up to 25 million pounds per business. The guarantees will be available to support working capital and other general costs, and will not be tied to specific export contracts, which was usually the case under previous schemes underwritten by export credit body UK Export Finance.
EU Commission Approves €625 Million Italian Scheme to Counter COVID-19 Impacts
(Schengenvisainfonews, Prishtina, 7 December 2020) Operators together and travel agencies in Italy affected by the Coronavirus outbreak will receive financial support to get out of the current economic crisis, as the European Union Commission has approved €625 million Italian scheme, under the State aid Temporary Framework. The European Commission concluded that the scheme notified by Italy completes the conditions set out by the Temporary Framework, significantly that aid will not surpass €800,000 per company; and it will be allocated by June 30, 2021. The Temporary Framework provides several types of aid, which can be granted by the Member States. The framework was amended, on April 3, May 8, June 29 as well as October 13, 2020, and includes, among other financial mechanisms, public short-term export credit insurance for all international countries, without the need for the Member State in question to show that the respective country is “non-marketable”.
Russian Export Forum to focus on COVID-driven incentives for businesses
(RT News, Moscow, 7 December 2020) On December 9, the ‘Made in Russia’ International Export Forum will hold a roundtable on “Fine-tuning the export support framework: countering the downturn in global trade.” Russian and foreign experts are expected to focus on the current state of global trade, support measures as well as prospects for 2021. It will bring together experts from development institutions and export credit agencies, as well as specialized international organizations to discuss current trends in global trade and key support measures during the ongoing pandemic. The participants will also share their forecasts for the next year.
Ugandans question ECA supported EACOP pipeline vs energy transition
(Daily Monitor, Kampala, 30 November 2020) In the wake of Covid-19, there is need for governments to ensure a just recovery and transition to low-carbon energy systems for economic and social recovery. Clearly, the government continues to fail Ugandans in-terms of current fossil fuels development plans. Government is still making progress towards development of its 6.5 billion barrels of oil, with plans to build a $3.5b East African Crude Oil Pipeline (EACOP). However, as government seeks to turn oil reserves into tomorrow’s fuels, oil development will certainly further lock us onto the path to irreversible climate change and failure to meet Paris Climate Agreement, goals. Moreover, many oil projects continue to rob locals of their land and livelihoods in violation of their land and other property rights. These are degrading the environment and climate in equal measure, hence fuelling a triple crisis. Mr. Cyrus Kabaale, Uganda
UKEF to stop funding overseas fossil fuel projects?
(Sydney Morning Herald, London, 12 December 2020) British taxpayers will stop subsidising overseas fossil fuel projects under a pledge by Prime Minister Boris Johnson which opens a new front in the push for more urgent international action on climate change. Johnson will announce the “world-leading policy” while opening a virtual climate summit on Sunday morning. The plan is yet to be finalised and a start date has not been settled, but Johnson will tell world leaders he will stop the government’s export credit agency from providing finance or other support for the extraction, production, transportation and refining of crude oil, natural gas or thermal coal overseas. Green groups have accused the British government of “rank hypocrisy” for talking tough on climate change while still directing billions of pounds towards polluting projects abroad. In June, it promised nearly £900 million ($1.58 billion) in loans and bank guarantees to help build a huge liquefied natural gas project in Mozambique which will open up the country’s vast gas reserves. Environmental campaigners are challenging the deal in court on the basis it is incompatible with the UK’s Paris climate accord commitments. A third runway at London’s Heathrow Airport was blocked by the courts in February because the mega infrastructure project did not take the UK’s climate obligations into account. UN secretary-general António Guterres is pushing for all development finance institutions to halt fossil fuel financing ahead of a crucial international climate summit in Glasgow next November. [Meanwhile, as recently as December 2nd, UKEF revealed in response to a parliamentary question that it had been approached regarding finance for Uganda’s EACOP pipeline, but that no decision has yet been made. The French, German and Italian ECAs are also reported to have been approached ($). While a welcome advance, we must remember that these measures have been promised for years with little progress to-date.]
Crisis response: a paradigm shift for ECAs
(Global Trade Review, London, 10 December 2020) When Covid-19 brought global trade to a near standstill, export credit agencies (ECA) stepped up by introducing or expanding cover for working capital programmes, rather than traditional project-led financing. But with the pandemic still raging and concerns over insolvency growing, do companies need to see a paradigm shift in export credit?
Norwegian Air secures court protection over €4.1bn debts
(Irish Times, Dublin, 7 December 2020) Norwegian Air Shuttle secured a crucial lifeline on Monday when the High Court granted the embattled carrier and five Irish subsidiaries protection from creditors. Norwegian owes creditors, mainly aircraft lessors and banks, more than $5 billion (€4.1 billion) in total, while it faces running out of cash early next year. Its 140 aircraft are held by companies based in Ireland. US aircraft lessor Aviation Capital Group recently got a judgement in the English High Court for $6.3 million for rent due on Boeing 737s. The Export Import Bank of the United States, which has given export credit guarantees to Boeing, is owed $46 million, while the carrier’s potential liability could run into the hundreds of millions, tied to ten 737s and three 787s.
Mexican ECA seals US$600mn credit facility for Covid-19 response
Bancomext, a state-owned bank and export credit agency in Mexico, has obtained a US$600mn credit facility from a syndicate of international banks that will support its response to Covid-19. Law firm Norton Rose Fulbright represented Banco Santander, Citibank and Commerzbank, the three banks that took part in the syndicate. The facility is guaranteed by the Multilateral Investment Guarantee Agency (Miga), a member of the World Bank Group. The facility will support the bank’s funding strategy “amid a sharp contraction in export revenues, which account for nearly 40% of Mexico’s GDP. It will also provide working capital to companies across key exporting sectors of the Mexican economy, including the automotive, aeronautic, transport and logistics, tourism, manufacturing, construction and agriculture industries,” the firm said.
